Around 1.5 million UK small and medium enterprises (SMEs) owners anticipate a loss of business this year due to the rising cost of living and soaring inflation.
A survey has found the majority (42%) of SMEs and micro businesses view rising inflation as the biggest threat, followed by energy prices (38%).
This information comes in a report released by Mastercard’s Strive Business Barometer to coincide with the UN’s Micro, Small and Medium-Sized Enterprises Day today.
“After struggling to stay afloat through the pandemic, the cost of living crisis is now adding extreme pressure to small businesses across every sector,” said Mary Portas, retail expert and ambassador, Mastercard’s Strive UK.
The data paints a similar picture to a recent survey conducted by Vodafone, which found that staying afloat is one of the main priorities for 32% of SMEs this year.
UK consumer confidence has plunged to its lowest level since the 1970s, while inflation last month hit 9% – the highest in 40 years.
Economists fear that the unprecedented shocks caused by supply chain problems, Brexit and the war in Ukraine may lead to recession.
UK tech remains beacon amid gloom – for now
Tech firms in the UK and across the world have been making layoffs in light of the worsening economic landscape.
However, UK tech investment has so far remained healthy, with startups raising £12.4bn for the first half of the year amid a public market slowdown.
The Strive report found that businesses using technology are more optimistic about the future. Almost half (48%) of businesses that use digital payments said they plan to grow in the next five years. In addition, 51% of businesses using social media and online advertising said the same thing.
Portas added: “As we look ahead, it’s clear that technology will play an increasingly central role in small businesses’ success – particularly for female and ethnic minority entrepreneurs who have historically faced greater challenges.”
Out of the businesses asked in the SME report, 40% said they are going to increase the use of technology in their business, with 39% saying it will be “crucial” for growing their business.
Mastercard’s report also found that 17% said funding was their biggest obstacle and 4% said it was hiring.
Last month it was found that Northern Ireland was the top UK region for coding job opportunities.
“Despite this, it’s positive to see so many business owners feeling optimistic about the future. Those that already invest in technology are the most confident, and the majority of businesses see technology as a vital part of their growth going forward,” said Kelly Devine, division president, UK and Ireland, Mastercard.
In spite of all this, 57% of UK small business owners said that they are “positive” about the future of their business.